beyondbrics

Christmas may be approaching, but there seems to be no thought of peace unto all men in the Hungarian parliament, with the government of prime minister Viktor Orban proposing what opponents see as yet more divisive legislation designed to expand government influence over independent institutions.

Right now it’s the turn of the central bank – again. Not content with expanding the monetary council this year by four parliament-appointed – Orban-friendly – members, the government has proposed a bill which would allow the prime minister the right to appoint the future governor and three, instead of the current two, vice-governors.

The monetary council would also be given more power over the execution of its decisions, and could be expanded the council from the current maximum of seven to nine members.

And while the bill stipulates that the bank’s primary responsibility remains price stability, critics say it further weakens the role and independence of Andras Simor, the current governor, who has been repeatedly attacked by the government since Fidesz took power in May 2010.

“This draft sends a bad signal. [If passed] the prime minister will [gain the right] to nominate all monetary council members, that is the so-called outside members, the vice-governors and [future] governors,” said Laszlo Akar, vice-president of GKI, a Hungarian economic research unit and a former Socialist deputy finance minister.

Such influence is “unprecedented” during the last two decades; “previous regulations have always given some role in the selection of the council members to the governor [himself],” he added.

Is it all so worrying? After all, the new monetary council members appoined this year have not, so far at least, appeared to vote on anything other than a professional basis?

Peter Kreko, research director at Political Capital, a Budapest-based think tank, notes that the new bill clearly restates “the independence of the central bank.” but nonetheless, the new proposals could undoubtedly prove to be “an efficient tool to influence [monetary council] decisions,” he says.

LMP, Hungary’s opposition green party, is also critical of the bill, which needs the support of at least one opposition grouping if it is to be fast-tracked into law this year, as the government hopes.

“Mr Orban wants to introduce the bill at this late stage is to bury it under an agenda overloaded with the EU crisis and the failure of the 2012 budget bill. LMP rules out expediting this law through parliament,” Gabor Scheiring, head of LMP’s economic policy working group, told beyondbrics.

While stressing that LMP wanted to see an expected ruling by the European Central Bank before reaching final conclusions on the bill, Scheiring added:

“The new rules on the appointment of vice-governors constitute yet another stage in the progressive takeover of the central bank by Fidesz, as started this year with appointment of the new members to the monetary council. Mr Simor will legally be placed under Fidesz trusteeship.”

Simor’s term of office comes to an end in 2013 – a little more than one year away – but it seems the government has no intention of allowing his remaining time in office to be any more comfortable than the past 18 months.

The ECB is likely to give its verdict on the government proposals on Thursday.

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